Clean energy PPA tariffs won’t be revisited by AP

The central and the Andhra Pradesh government led by Y.S. Jagmohan Reddy have reached a consensus to end the ongoing controversy hovering around the renewable sector of the state.
Recently, a committee was set up following the request of the Andhra Pradesh energy minister Balineni Srinivasa Reddy for discussing various issues pertaining to the renewable energy sector.

During a recently held meeting between the Ministry of New and Renewable Energy (MNRE) and the representatives of the Andhra Pradesh government, it was decided that the power purchase agreements (PPAs) for which the tariffs have been fixed by the state electric regulatory commission (SERC) and signed will not be revisited.

The MNRE clarified to the state government that the PPAs once signed are “sacrosanct and cannot be renegotiated unless there is a clause to do so in the agreement or a case of corruption has been approved.”

The MNRE also stated that if the PPAs are not honored by the state government, then it will not make the environment conducive for making investments in the country and the renewable sector.
The state government agreed that the PPAs once signed are “sacrosanct and should not be revisited.”

Further, the MNRE also informed the representatives of the Andhra Pradesh government that the Solar Electricity Corporation of India (SECI) has decided to enforce the tripartite agreement for collecting its dues of around ₹2.8 billion (~$38.5 million) for the renewable energy power supplied from the funds that would be transferred from center to state.

The government of Andhra Pradesh has assured to pay ₹2.8 billion (~$38.5 million) within 10 days. The dispute in the state has been going on for months, with the renewable generators apprehensive about the future of their projects.

State DISCOMs had directed solar and wind developers to reduce the tariff and submit the revised power supply bills. The committee’s constitution was set aside by the state high court. It further brought up instances of abrupt disruptions of power supply and from wind generators and irregular power curtailment by renewable energy generators in the state.

Further, the Andhra Pradesh government informed that after the state’s split, it has been in a bad financial condition, and it is difficult for the state to make timely payments to the renewable generators “particularly in a situation where renewable power has been purchased in excess of the prescribed renewable energy purchase obligation (RPO) limit prescribed by the central government.”

According to government documents, it has also been decided that concessional loans should be provided to the state by the state-run companies, namely the Power Finance Corporation Limited (PFC), REC Ltd, and the Indian Renewable Energy Development Agency (IREDA), to clear the accrued dues.

The government has also decided that the inter-state transmission and losses (ISTS) charge will also be waived for the sale of renewable power by the state governments that have installed renewable energy capacity more than the RPO limit prescribed by the central government.

Another decision reached the meeting was that in case the state government resorts to the curtailment of solar or wind power for reasons other than grid safety, the state utility would be bound to pay for the curtailed power as it enjoys ‘must run’ status.

Additionally, the National Thermal Power Corporation (NTPC) has offered to buy 300 MW of renewable power from Andhra Pradesh at a mutually agreed rate, according to the MNRE.

“The Andhra Pradesh government’s move to renegotiate and revisit PPAs of solar and wind power generators has completely disrupted the solar and wind industries freezing project development and lending activity. Hopefully, this new agreement ends the uncertainty in the industry,” said Raj Prabhu, CEO of Mercom Capital Group.

The ongoing dispute in Andhra Pradesh has set a bad precedent, and the industry will take a some time to recover from this. Banks have been averse to lending to state projects.

Previously, the National Solar Energy Federation of India (NSEFI) requested the Union Power Minister R.K. Singh to bail out solar generators from the ongoing renewable energy dispute in Andhra Pradesh.

Expressing its apprehension over the Andhra Pradesh government’s decision to revisit the PPAs, the central government had earlier stated that no contractual agreements could be revisited as such an act would not only disturb the national goal of renewables but will also impede the confidence of the investors.

The state currently has ~3.4 GW of large-scale solar projects in operation, and 1.7 GW are under development.